Cross border insolvencies and financial restructurings are remarkably opaque considering we live in the Information Age. The mission of the Centre of Main Interest (the COMI) is to light some candles in the darkness and create a forum for further discussion. The Law Offices of Tally M. Wiener, Esq. are pleased to publish the COMI blog.
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Thursday, September 20, 2012

Belize Default Looms as Negotiations Continue

Per www.globalinsolvency.com:

Thu., September 20, 2012

Belize is poised to default on its only bond, as the country's negotiations with creditors continue, The Wall Street Journal reported. In August, the Central American nation failed to make a $23.1 million interest payment, initiating a 30-day window during which it must pay or become the first country since Greece to default on its sovereign debt. The grace period was scheduled to end at 5 p.m. EDT Wednesday. Belize and its bondholders are negotiating to restructure the country's debt. However, a default would set up a likely showdown later this year, when analysts expect the government to submit a restructuring offer to investors. Creditors will then choose to participate or pursue litigation against the country in U.S. courts. Belize announced on its central-bank website in August that it could no longer afford to pay its $548.3 million in outstanding debt. It has asked for a substantial reduction in its obligations or to pay over a longer period. Government officials and creditors have been negotiating ever since. Both parties have hired advisers—investment bank BroadSpan Capital for a creditor group holding more than 50% of the bonds and White Oak Advisory for the government—but there has been little public progress. Creditors include GE Asset Management, Greylock Capital Management, Grantham Mayo Van Otterloo & Co. and BTG Pactual. A.J. Mediratta of Greylock Capital, who is co-chairman of the creditor committee representing holders of $300 million of the bonds, declined to comment. "Everyone thinks they will default," said someone close to the creditors. But the person added, "we don't have certainty either way yet." Bondholders said they were surprised by the decision to skip the August interest payment, because Belize isn't facing a liquidity crunch. Edward Al-Hussainy, an analyst at Moody's Investors Service, said it is uncommon for countries to request debt restructuring unless they face an imminent budget crisis. Belize intends to restructure its debt using a "collective-action clause" in its bond contracts, according to the central bank's website. A collective-action clause is a way of strong-arming reluctant creditors into new debt terms. Greece invoked the clause in its sovereign-debt restructuring this year, requiring creditors to exchange old bonds for new ones that were worth less. Belize would need 75% of creditors to sign on before invoking the clause, which would bind all creditors, even those who didn't approve the restructuring.